Facts
In 2003, Mr Panetta (Mr P) and Ms Lam (Ms L) had moved into a property owned by Ms Pedulla (Mr Panetta’s sister). Ms Pedulla was in Italy at the time. Mr P and Ms L instructed Mr Yee, a solicitor, to assist with transferring the property to Mr P.
Of note, Mr Yee had previously instructed Ms L on the purchase of a property, before developing a romantic relationship. They soon moved in and began working together. Mr Yee subsequently became acquainted with Mr P. Mr Yee and Ms L soon became no longer romantically acquainted, and Ms L and Mr P developed a romantic relationship. When Ms L and Mr P moved in together, Mr Yee became aware that the property belonged to Mr P’s sister.
Mr Yee advised Mr P and Ms L that he would require a written authority from Ms Pedulla to release the certificate of title (which was held by another law firm), as well as a power of attorney from Ms Pedulla to have the property actually transferred. Mr P and Ms L subsequently delivered this written authority and a power of attorney to Mr Yee which appeared to have been signed by Ms Pedulla. Mr Yee’s evidence was that he had no reason to doubt the authenticity of either document. From that point, Mr Yee assisted in having the property transferred to Mr P. This occurred in 2007.
In July 2011, the plaintiff, Ms Pedulla, subsequently made a claim against her brother, Mr P and his wife, Ms L, for allegedly fraudulently dealing with a property of which the claimant was the registered proprietor.
The plaintiff also joined the Registrar-General as a defendant in those proceedings, seeking compensation from the Torrens Assurance Fund. The Registrar General then filed a cross-claim against Mr Yee (and the plaintiff subsequently joined Mr Yee to the proceedings). Mr Yee held professional indemnity insurance with LawCover for claims made for only a particular period (namely, between 1 July 2011 and 30 June 2012).
On 25 November 2011, the judgment in Pedulla v Panetta [2011] NSWSC 1386 was handed down. Pembroke J found in favour of Ms Pedulla against Mr P, Ms L and the Registrar General. His Honour also held in favour of the Registrar General against Mr Yee on the Registrar General’s cross-claim. However, LawCover declined indemnity under the policy based on fraud and dishonesty exclusion. Therefore, the Registrar General was unsuccessful in recovering compensation from Mr Yee’s LawCover policy for the amount paid out of the Assurance fund to the plaintiff.
Issue
The Registrar General, therefore, sought leave to commence proceedings against LawCover under s6(4) Law Reform (Miscellaneous Provisions) Act 1946 (NSW). The Registrar-General claimed that the ‘event’ (within the meaning of s6) that gave rise to the claim for compensation was the institution of proceedings by the plaintiff, Ms Pedulla, against the Registrar General.
LawCover contended that the event that gave rise to the claim was Mr Yee’s negligent conduct that caused the Ms Pedulla to lose her property, and the loss did not occur during the period covered by the policy. LawCover claimed that the Registrar General had no arguable case for relief on the grounds of primary judge’s decision, which established that indemnity was excluded on the basis that liability arose from the Mr Yee’s dishonest acts.
LawCover stated that the event that gave rise to Ms Pedulla’s claim was the fraudulent transfers of property, and the transfers occurred outside the period covered by the policy. Accordingly, no indemnity charge was created upon the insurance money’s under the policy.
Held
The application was dismissed.
The Supreme Court held that, the nature of the “event” giving rise to such a claim for damages or compensation, within the meaning of s6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW), was the event that gave rise to the claim against Mr Yee. At [40], the Court noted that:
“Mr Pedulla’s cause of action against Mr Yee was consummated at the first point that she suffered loss as a result. That was the happening of the event giving rise to her claim for damages to which the Registrar-General has become subrogated. The fact that the Registrar General may not, in this case, have been called upon to pay compensation until a later time does not alter the fact that the relevant event for the purposes of s6(1) was the point when Mr Yee’s acts or omissions caused loss.”
Accordingly, the Supreme Court of New South Wales found that no indemnity charge was created on any insurance monies that became payable under the LawCover policy because the loss suffered by the proprietor from the fraudulent transfers of the property (the “event”) occurred outside the covered period. As such, Harris J concluded at [41] that the policy was, therefore “not in existence at the time of the ‘happening of the event giving rise to the claim for damages or compensation’ as contemplated by s6(1) of the Act”.
Conclusion
There are very few case authorities on the meaning of “event”, as provided in Section 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW), in respect of primary layer policies. The decision provides some clarity in this respect.
It is useful to have such a case. This is particularly in relation to Section 6 arguments.
